Exam 7: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

Studies of mutual fund performance indicate that mutual funds that outperformed the market in one time period usually

A stock's price will fall if there is

Excessive volatility refers to the fact that

Which of the following accurately summarize the empirical evidence about technical analysis?

In a one-period valuation model,a decrease in the required return on investments in equity causes a(n)________ in the ________ price of a stock.

The global financial crisis lead to a decline in stock prices because

The efficient markets hypothesis implies that prices in the stock market

According to rational expectations theory,forecast errors of expectations

________ is the field of study that applies concepts from social sciences such as psychology and sociology to help understand the behavior of securities prices.

A stockholder's ownership of a company's stock gives her the right to

You believe that a corporation's dividends will grow 5% on average into the foreseeable future. If the company's last dividend payment was $5 what should be the current price of the stock assuming a 12% required return?

The efficient markets hypothesis indicates that investors

Increased uncertainty resulting from the global financial crisis ________ the required return on investment in equity.

Information plays an important role in asset pricing because it allows the buyer to more accurately judge

If a market participant believes that a stock price is irrationally high,they may try to borrow stock from brokers to sell in the market and then make a profit by buying the stock back again after the stock falls in price. This practice is called

The major criticism of the view that expectations are formed adaptively is that

Mean reversion refers to the fact that

In the generalized dividend model,if the expected sales price is in the distant future

Using the Gordon growth model,a stock's price will increase if

If expectations of the future inflation rate are formed solely on the basis of a weighted average of past inflation rates,then economics would say that expectation formation is